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3d 691
The question in this case is whether the claimed loss of a contractual security
interest can constitute the kind of irreparable harm necessary to support
issuance of a preliminary injunction. Although the close relationship of such a
claim to money damages makes obtaining a preliminary injunction difficult, we
The relationship between the two companies was not a happy one. For reasons
which are in dispute, InterDigital took delivery of less than 7,000 of the 54,000
units Hughes had agreed to produce. In an attempt to remedy this problem,
Hughes and InterDigital negotiated a new agreement in February 1992. This
"Master Agreement" reordered the relationship between the two parties.
Among its terms was a "lockbox" provision which stated that:
InterDigital refused to enter the lockbox, and in February 1993, Hughes sued to
force InterDigital's compliance with the lockbox mechanism and to recover the
money owed to it by InterDigital. InterDigital responded to the suit with eight
counterclaims alleging, among other things, that Hughes had breached
II.
8
On appeal, Hughes claims that the district court abused its discretion by failing
to issue the preliminary injunction when the balance of hardships tipped
strongly in Hughes' favor. To prevail on this argument, however, Hughes must
demonstrate that it has suffered the type of harm that may be considered in the
Blackwelder balance. Because the lockbox remedy involves a payment of
money to Hughes, Hughes must overcome the presumption that preliminary
injunctions will not issue in cases where the harm suffered may be remedied by
money damages at judgment.
A.
10
The reluctance to award preliminary injunctions where the harm at issue can be
remedied by an award of money damages at judgment arises out of the concerns
12
Because of these concerns, courts have insisted that the harm necessary to
justify issuance of a preliminary injunction be irreparable. The Supreme Court
has stated:
Sampson v. Murray, 415 U.S. 61, 90, 94 S.Ct. 937, 953, 39 L.Ed.2d 166 (1974)
(quoting Virginia Petroleum Jobbers Assoc. v. Federal Power Comm'n, 259
F.2d 921, 925 (D.C.Cir.1958)).
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B.
16
extraordinary circumstances may give rise to the irreparable harm required for
a preliminary injunction. For example, the Seventh Circuit has noted that even
where a harm could be remedied by money damages at judgment, irreparable
harm may still exist where the moving party's business cannot survive absent a
preliminary injunction or where "[d]amages may be unobtainable from the
defendant because he may become insolvent before a final judgment can be
entered and collected." Roland Mach. Co. v. Dresser Indus., Inc., 749 F.2d 380,
386 (7th Cir.1984); see also Hoxworth v. Blinder, Robinson & Co., Inc., 903
F.2d 186, 206 (3d Cir.1990) (holding that "the unsatisfiability of a money
judgment can constitute irreparable injury"). These situations are quite narrow,
reflecting instances where the harm suffered by the plaintiff from denying the
injunction is especially high in comparison to the harm suffered by the
defendant from granting it.
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18
A.
19
20
21 only harm that I can find, and, in fact, the only harm that has been argued by
the
[Hughes] is that if the preliminary injunction is not granted the lock box remedy
will be lost.
22 I can understand that that may be unfortunate for [Hughes]. But to leave it up
Well,
to a Court to determine whether a preliminary injunction is appropriate in a
straightforward contract situation where the parties, for whatever reason, have been
unable to determine what would be in their best interests to put into that contract to
back up their particular terms, it seems to me to miss the mark completely with
regard to what is required in a preliminary injunction situation.
23
This statement is far from clear. The district court may be implying that loss of
the lockbox will do little harm to Hughes and, therefore, that a preliminary
injunction is not justified. Alternatively, the statement may be read to mean that
the type of harm Hughes suffered simply cannot be considered for purposes of
an irreparable harm showing. Other interpretations are possible as well: at oral
argument, for instance, Hughes claimed that the "only harm" language in the
above quotation meant not only that the district court had found harm to Hughes
but also that it had found that InterDigital would not be harmed by the
injunction.
B.
24
Hughes has argued that a preliminary injunction must issue here because
monetary relief at judgment cannot compensate for loss of the lockbox. The
company points out that the lockbox establishes a security interest which will
protect Hughes' credit priority should InterDigital eventually become insolvent.
Hughes maintains that forcing InterDigital to enter the lockbox now is the only
way to preserve this security interest and to protect Hughes' contractual
entitlements.
25
This argument is too narrow. Hughes' claim may not be identical to ordinary
claims for money damages, but it undeniably bears a close kinship to them. Its
suit, at bottom, is one for the recovery of a debt owed by InterDigital. The
security interest provided by the lockbox and a straightforward award of
damages are paths to the same end: the collection of sums allegedly owing to
Hughes. The security interest established by the lockbox merely gives Hughes
greater assurance that it will ultimately receive the recovery. Indeed, the
lockbox itself apparently contemplates the actual transmittal of money by
InterDigital to Hughes in advance of final judgment. As such, Hughes' claim
bears the infirmities of a request for payment prior to a determination of the
case on the merits.
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27
If on remand, the district court finds that Hughes is threatened with the kind of
harm described above, it must then turn to the other Blackwelder factors.
Specifically, it must evaluate the effect of injunctive relief on InterDigital's
ability to continue dealing with the suppliers and customers necessary to its
operation. A predictive judgment must also be made regarding the strength of
Hughes' claim to the funds InterDigital allegedly owes it and the legitimacy of
InterDigital's various counterclaims. In a case where time is important to the
parties, the district court may also weigh the prospects for a prompt final
judgment in determining the need for any preliminary relief. Finally, the court
should consider the effects of preliminary injunctive relief on any nonparties
who may possess a significant interest in the outcome. See Kershner v.
Mazurkiewicz, 670 F.2d 440, 443 (3d Cir.1982) (en banc) (considering harm to
"other interested persons" and "to the public interest" in deciding whether to
issue a preliminary injunction); Washington Metro. Area Transit Comm'n v.
Holiday Tours, Inc., 559 F.2d 841, 843 (D.C.Cir.1977) (same).
IV.
28
We thus remand the case for further proceedings consistent with this opinion.
We recognize the value in not permitting a lawsuit to become bogged down in
the Blackwelder factors, but neither do we think the inquiry required by that
decision is one that can be ignored. For the foregoing reasons, the judgment of
the district court is
29